Demand accountability from your adviser

George Sisti, CFP, is a certified financial planner practitioner and the
founder of On Course Financial Planning, a fee-only Registered Investment
Advisor firm. George graduated with a BS in Mathematics from the State
University of New York at Stony Brook in 1971. After graduation, he served 6
years as a pilot in the United States Air Force, based at McChord AFB, WA. In
2013 he retired after a 35-year career as a pilot for a legacy U.S. airline. George established On Course
Financial Planning in 2004 to help families gain the peace of mind that comes
from knowing that they will be able to retire at the time of their choosing and
not have to worry about running out of money in retirement. He has been a member
of the Financial Planning Association since 2004. He can be contacted through
his website: oncoursefp.com

I've been paying attention and taking notes. There's just not a lot of deep thinking that goes on in the financial advisory business. There's lots of product pushing, generic advice, account churning, speculating with clients' money and hidden fees. If serious thought precedes most advice given to clients, it's news to me.

Wall Street's representatives are taught to "close the sale" by exploiting the knowledge gap that exists between a client and a broker. The client comes to a meeting hoping the broker can recommend an investment strategy to achieve their financial goals. The broker comes to the meeting with a lineup of products and worries about meeting quota. It should come as no surprise that combining a conflict of interest with the knowledge gap rarely serves a client's best interest.

Most financial advisors could better assist their clients if they spent more time studying history. Too many waste their time scouring the financial news for sound bites to repeat to clients to give the impression that they have their fingers on the pulse of the market. Mark Twain was right when he said that history doesn't repeat itself but it rhymes. The best financial advisors offer their clients wisdom and perspective. TV offers neither.

Most investors cannot differentiate between speculating and investing. I remain perplexed that many financial professionals seem indifferent to, or responsible for, this sad state of affairs. Wall Street rewards its successful risk takers with promotions and bonuses. So it's no surprise that many of its representatives, who can only pretend to possess stock picking and market timing skills, roll the dice and turn clients into unwitting speculators.

Financial professionals who emphasize trading over investing have lost their faith in the future. Why else would they abandon a long-term perspective and engage in short-term speculation? If our nation somehow muddles through its self-inflicted problems, taking financial advice from someone with a pessimistic worldview doesn't seem to me to be a recipe for success.

It's time for individual investors to demand accountability from Wall Street. You deserve, and should insist, that investment strategies are explained in plain English. Any good financial advisor will be happy to do so. Many clients are too timid to ask for explanations and can only hope that they are receiving good advice. Never leave a meeting with a financial advisor in a state of confusion. Insist that any changes to your portfolio be clearly explained and done only after an analysis of the tax ramifications and a full disclosure of the costs involved.

Unfortunately, two bear markets since 2000 have caused many advisors to forgo a buy-and-hold strategy and adopt a "tactical approach" — a pseudonym for the discredited strategy of market timing. If your advisor has adopted a tactical approach, be sure to ask why he or she will succeed where so many others have failed.

"We believe that we can find money managers who can beat the market" is not an explanation, it is a delusion.

Complexity is the playground of scoundrels. Avoid complex investments that you don't fully understand. "I sold this annuity to my mother" does not justify a recommendation; it brings into question a son's love for his mother.

If last year's speculations didn't work out as expected — perhaps you were over-weight emerging market stocks or commodities — ask for an explanation. Be on your guard because explaining underperformance using 20/20 hindsight is easy and deflects attention away from the real issue: That no one has the 20/20 foresight needed to outsmart the markets. Assertions to the contrary are not honest; they are figments of the imagination.

I started my financial planning firm at the age of 55 in possession of an adult perspective, a love of history, an aptitude for numbers and 30 years of sitting on the client side of the table. I was never trained or nurtured by Wall Street's market-timing and stock-picking culture. Maybe that's why I'm not afraid to say that there's less there than meets the eye.

I sometimes feel like a kid on the outside looking in when the circus comes to town. I'm staring through a hole in the tent and I see a cluster of clowns trying to outsmart one another. I'm not laughing because what I see isn't the least bit funny. Then I hear something, a familiar melody from years gone by. It's the voice of Judy Collins singing Send in the Clowns — my recommendation for Wall Street's official anthem.

“Don’t you love farce? My fault, I fear. I thought that you’d want what I want ... Sorry, my dear! But where are the clowns? Quick — Send in the clowns Don’t bother, they’re here.”

Demand accountability from those who offer you financial advice in 2014. You deserve it, they owe it to you.

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